Washington — The North Carolina Utilities Commission is protesting Transcontinental Gas Pipe Line's proposed Leidy South expansion project, contending that Transco has not shown that existing shippers, including those in North Carolina, would not be harmed, nor that proposed rates follow policy and precedent at the Federal Energy Regulatory Commission.
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The action is the latest of a series of NCUC protests of pipeline projects and rate proposals at FERC, including those for several other Transco expansions.
NCUC has previously questioned whether FERC's approach considers whether returns reflect market conditions and produce recourse rates that serve their intended purpose of providing a check on a pipeline's market power in reaching negotiated rates with project shippers.
The 582 MMcf/d Leidy South project would move gas from production areas in Pennsylvania along the Central Penn Line to an interconnection with Transco's mainline near the Pennsylvania-Maryland border. The capacity has been reserved by producers Cabot Oil & Gas (250 MMcf/d) and Seneca Resources (330 MMcf/d), along with UGI Utilities (2.4 MMcf/d).
In its application filed July 31 (CP19-494), Transco said the project will enable it to provide 582,400 Dt/d of incremental firm capacity for abundant supplies of natural gas from northern and western Pennsylvania to markets in Transco Zone 5 and Transco Zone 6.
The state regulators, in a protest filed Wednesday with FERC, questioned Transco's assertion that capacity is expected to serve local distribution companies, power plant conversions from coal, and new natural gas generation plants, in Transco Zone 5 and Transco Zone 6, including in New York, New Jersey, North Carolina, and South Carolina.
"Transco simply fails to explain how the capacity can serve loads outside of Zone 6 if the only path rights created, and the only incremental capacity to be constructed as part of the Leidy South Project, are in Zone 6," NCUC wrote Wednesday.
North Carolina regulators also argued that Transco failed to show service will not be degraded for existing shippers outside of Zone 6 in states Transco asserts will be served by new capacity.
They also argued the proposed return and depreciation rates used to calculate recourse rates run counter to FERC policy and raise questions about whether overstated recourse rates could check market power. To back its proposed recourse rate, Transco has offered no support for using its last proposed, rather than last approved, rate of return and depreciation rates, NCUC contended. The pipeline company used "the inflated, filed-for return figure and depreciation rates" from a rate filing, "which has been accepted subject to refund but not approved by the commission," NCUC continued.
Transco spokesman Christopher Stockton said "we have received this protest and other interventions, which we are currently reviewing to develop an appropriate response." Among the intervenors are Duke Energy Carolinas, Duke Energy Progress, Piedmont Natural Gas, Southern Company Services, Exelon, and other shippers.
NCUC in December similarly protested recourse rates proposed in the MVP Southgate project, an extension of the main Mountain Valley Pipeline project that would serve SCANA utility PSNC Energy.
Previously, NCUC joined the New York State Public Service Commission in an appeals court challenge to FERC approvals of three Transco projects -- the 1.7 Bcf/d Atlantic Sunrise expansion, the 448 MMcf/d Dalton expansion and the 250 MMcf/d Virginia Southside II expansion. The state commissions argued the recourse rate FERC used was based on an outdated and inflated pre-tax return set in 2002, but the US Court of Appeals for the District of Columbia Circuit in April found the state commissions lacked standing because they failed to establish injury, such as higher prices for ratepayers. An NCUC challenge is pending in the same court to FERC's approval of recourse rates for the Atlantic Coast Pipeline.
The Leidy South project involves installation and replacement of several short pipeline segments, two new compressor stations, upgrades of two compressor stations and other facilities, along with leasing arrangements. Transco targeted in-service in time for winter heating in December 2021.
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